22 August 2011

Corruption to Remain Unchanged for Next Two Years

With Anna Hazare taking a toll over corruption issue in India, many supports have taken leave from their studies or job that includes people from corporate and public sector to support the moment. So, is the corporate world that affected by corruption and bribery that they need to revolt against the system. It is expected that despite of several measures, such as Central Vigilance Commission's proposed National Anti-Corruption Strategy and the Right to Information Act, 2005, the corruption will remain unchanged for next two years.

KPMG in India conducted a survey 'Survey on Bribery and Corruption - Impact on Economy and Business Environment, 2011.' The survey was conducted with certain leading Indian corporates in order to understand their perception of how corruption is corroding the economy as well as the corporate environment.

Corruption has a significant impact on the economy and businesses of India. For the current stage of corruption, people who pay bribe are proportionately responsible with the one who takes. Rules should be framed for both parties to curtail the growth of corruption. More than the projected nine percent GDP growth can be achieved if corruption is controlled as it is a key risk to the projected growth rate.

The World Economic Forum's Global Competitiveness Index 2010 lists freedom from corruption as one of the factors that influences an economy's competitiveness amongst other factors like business freedom, trade freedom, fiscal freedom and government spending. India's growth story in the coming decade may be hampered by corruption. It may also affect its fair business competitiveness and growth opportunities domestically and globally.

The foreign direct investment into the country, negative impact on the performance of capital markets and a volatile political and economic environment are the other ways in which corruption could result in lower GDP, assumes the respondents. A reduction of 11 percent in per capita FDI inflows may be seen due to a one-point increase in the corruption level, suggests an International report. Over 90 percent of the respondents are of the opinion of the corruption negatively impacting the performance of stock markets by increasing volatility (40 percent) and prevents institutional investors from making long term investments (32 percent).

The international financial markets seeks corruption to be associated with higher borrowing costs, lower stock valuations and bad corporate governance. The respondents believe that corruption results in lower and sub-graded business players coming into picture to execute projects even with lesser capabilities. About 68 percent of the respondents believe that the private sector is responsible for such high level of corruption, and a over whelming 31 percent respondents stated that corporate organizations pay bribe to win and retain business/tenders. But while turning the situation into their favor, they forget that their opponent may also use the same policy the next time to win the business and turn the situation against them.

This is true in respect to every country where corruption either is on its height or has just spread its leg. The roadway to success is blocked by this bribery and corruption, which needs an urgent comprehensive framework to curtail corruption at all levels, may be private or government sectors.